December 2009

U.S. Equities Advance to Fourteen-Week Highs

U.S. Session Key Developments

•    Abu Dhabi Bails Out a Dubai World Unit
•    Metals Gain as the Dollar Weakens

U.S. stocks rallied for a fourth consecutive day and the Dow Jones Industrial Average closed above 10,500 for the first time since October 1, 2008.  Investors around the world cheered news that Abu Dhabi bailed out a Dubai World unit and pushed the MSCI World Index to 1164, its highest close in a week.  Abu Dhabi pledged $10 billion that allowed Dubai World’s Nakheel real-estate unit to avoid default on $4.1 billion of bond payments that matured today.  This helped allieve the U.S. stock market which tumbled over a percent the day after Thanksgiving on concerns over Dubai’s debt troubles.  In addition to stocks, gold futures traded off Friday’s four-week lows and gained nearly $4 to close above $1123.  Silver posted a gain alongside gold, but oil continued its bearish trend and closed under $70 for a second consecutive day.  Crude oil has dropped nearly 15 percent since the middle of November.  While commodities were mixed, the dollar faltered slightly, but remained above 76 for a fifth consecutive day.  Prior to the past week, the greenback had not traded above the 76 handle since the first two days of November.  Looking ahead to tomorrow, a plethora of economic data could act as a catalyst for a large move in equities.  Key U.S. data includes producer prices, industrial production, capacity utilization, and the ABC consumer confidence guage.

DJIA 30                      10,501.05                   +29.55               +0.28%
The Dow rose to its highest level since last October as basic materials and the financial sector gained over 1 percent each.  The financial stocks gained after news that one of Dubai World’s real estate units was bailed out and would not default on its bond payments.  JPMorgan Chase was the leading stock in the index, gaining nearly 2 percent.

S&P 500                     1,114.11                        +7.70                     +0.70%
The broader S&P500 index posted a strong move upwards despite a relatively quiet day in terms of news.  Energy stocks gained slightly as Exxon Mobil Corp. agreed to buy XTO Energy Inc. for $31 billion.  Visa added 4.2 percent to an 18-month high after it was announced that the credit-card company will join the S&P after the close of traidng on December 18.

NASDAQ                    2,212.10                      +21.79                    +0.99%
The tech-heavy Nasdaq was the biggest gainer of the U.S. indices as its oil & gas component gained over 3 percent and technology stocks rebounded to close nearly 1 percent higher.  Oracle was the biggest gainer of the ten most heavily-weighted tech stocks on the index after it offered proposals to buy Sun Microsystems.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

NASDAQ Triangle Formation Warns of Potential Breakout

As is often the case in Elliott, the picture is becoming much clearer as the rally has matured and nears its end.  The advance from the March low is a complex W-X-Y (a-b-c-x-a-b-c) rally.  Notice the broadening formation since August.  Broadening patterns almost always signal tops (called ending diagonals in Elliott terminology).  Levels to watch for resistance are 10365 and 10495 (100% extension).

The Dow continues to trade along trendline resistance which is steering the blue chip index toward a test of 10,581-61.8% Fibo of 13,136-6,469. However, 10,500 has been a formidable level which increases the likelihood of a retrace back toward support at 10,000 with potential to trendline support.

The S&P is in a similar situation to the Dow.  The count from the March low is the same but the recent surge that propelled the Dow to a new high has yet to do the same for the S&P.  A broadening formation from the August low is evident here as well, which again does warn of a top.  A new high exposes 1110.30 (top of gap from October 2008 in December contract), then 1134 and 1159 (100% extension) in the index.

The S&P 500 continues to consolidate after failing to break above resistance at 1,120- 50.0% Fibo of 1,576- 666 which could foretell of a breakout. A test of trendline support near 1,080 remains a strong possibility the longer the broader index remains below resistance. A break above the Fibo level exposes 1,150.

The NASDAQ pattern is the same as the S&P pattern in that the index has yet to make a new high.  The more volatile index also broke a support line and dropped below its October low (red line) – something that the other indexes failed to do.  Clearly, the technical situation for bulls is deteriorating.  A new high would expose 2341 (100% extension).

The NASDAQ has started to form an ascending triangle pattern which is a sign for a potential bullish breakout. However, if trendline resistance holds then we could see the continuation of the longer developing triangle which equals more concentrated price action with the possibility of another test of support near 2,095.

Oil, Metals Under Pressure as Dollar Gains on Fed Outlook

Commodities – Energy

Oil Drops Below $70 as US Dollar Gains Momentum

Crude Oil (WTI)       $69.19       -$0.68       -0.97%
Oil prices have slipped below the psychologically significant $70 level and are now testing $68.86, with a sustained push lower opening the door for a decline to $65.65. The economic calendar is empty, leaving prices with no definitive fundamental catalysts other than the direction of the US Dollar. Indeed, crude is now 83.3% correlated with EURUSD.

Commodities – Metals

Metals Decline as Retail Sales Boosts US Rates Outlook

Gold       $1121.43       +$6.03       +0.54%
Prices are working their way lower, grinding through support in the $1111.20-1123.38 region, with a push below that clearing the way for a test of $1100. The spread between March 2010 and December 2010 90-day fed funds futures has retained a strong inverse correlation with gold prices, hinting that the outlook for US interest rates next year remains the key catalyst from the fundamental side of things. On balance, this seems supportive of the bearish scenario, with no significant event risk on tap to threaten momentum from last Friday’s encouraging US retail sales report.

Silver       $17.23        +$0.07       +0.38%
Silver is testing support at $17.02, but positive RSI divergence hints that an upswing may be ahead before the bears can regain momentum. Initial resistance is seen at 17.76, while a break lower will open the door for a decline to $16.74. Fundamentally, the landscape is much the same as that of gold, with the US rates outlook being of primary importance.

Asia/Pacific Stocks Mixed on Monday; Abu Dhabi to Provide $10 Billion to Dubai World

Asia Session Key Developments

• Dubai to Provide $10 Billion to Dubai World Meet its Obligations
• Japan’s Industrial Production Climbs for a Fifth Successive Month

Asia/Pacific Stocks Mixed; Dubai to Provide $10 Billion to Dubai World

Shares in Tokyo tipped .02% lower as corporations in Japan continued to be reluctant to invest in new factories, with the tankan survey of business sentiment displaying large manufactures standing at -24. However, the main concern on the breakdown of the survey is the uncertainty in capital spending due to distress of deflation and a strong yen, which largely hurts Japanese exporters as it pierces away from profits overseas. Meanwhile, shares in Hong Kong and Australia advanced as Abu Dhabi provided $10 billion to aid Dubai World meet its financial obligations.  In Hong Kong, industrial production fell 8.6% from a year earlier, while producer prices narrowed at an annualized 2.0% from a revised 3.0% the month prior.  Moreover, the Japanese government is planning to cap new bond sales at 44 trillion yen next year, with debt to sales appearing in a an outline of the budget, which will be released tomorrow, as Mikio Shimoji, the head of policy research at the People’s New Party told reporters in Tokyo today.

Nikkei 225                          10,105.68

The Japanese equity markets pushed lower on Monday as corporations in Japan continued to be reluctant to invest in new factories, leading the Nikkei 225 to slip 2.19 points lower (.02%) and close at 10,105.68, with utilities falling 1.40% to lead the decline, while industrials added 0.59%. Shares of JTekt Corporation climbed 4.28% amid Credit Suisse Group raising the auto-parts maker to “outperform” from “underperform,” while Japan’s Airlines pushed 3.16% higher, marking its first rise in a week subsequent to Japan and the U.S. agreeing on a draft “Open Skies” treaty. On the other hand, Mitsui OSK Lines, Japan’s second-largest shipping line by sales, slumped 2.92% accompanied by Deutsche Bank AG cutting the company’s stock rating to “hold” from “buy.” Nevertheless, Senshukai plunged 10% to post its lowest trading day since May of 2002 as the company revised its full-year outlook from a 1.51 billion yen profit, to a 4.84 billion yen net loss.

Hang Seng                        22,085.75

Hong Kong shares closed to the upside on Monday subsequent to Dhabi providing $10 billion to help Dubai World meet its obligations, leading the benchmark equity index to add 183.64 points (0.84%) and end the trade at 22,085.75 as 8 of the 9 components traded higher on the day. Shares of China Petroleum & Chemical Corporation sky-rocketed 7.30% on speculation that the nation’s largest refiner may buy oil and gas assets from its state-run parent, while China Resources Power Holdings rose 3.61% as the company announced that sales for November pushed 44% higher from a year earlier.  Moreover, Aluminum Corporation, the top aluminum group in China, gained 3.35% as executives said the corporation resumed all idle capacity of alumina and aluminum, therefore, boosting its production. Meanwhile, China Mobile advanced 1.42% due to Mirae Asset Securities raising the company’s stock rating to “hold” from “reduce.”

S&P/ASX 200 Index           4,654.00

Stocks in Australia traded higher on Monday for a second straight day on the back of higher metal prices, leading the S&P/ASX 200 to rise 18.80 points (0.41%) and close at 4,654.00. Nine of the ten components traded higher on the day, with consumer services adding 1.19%, while oil & gas slid .03% to taper the advance. Shares of Woolworth, one of Australia’s top retailers soared 1.64% as CEO Michael Luscombe stated that the company is predicting that retail sales will top last year’s take, while Alumina surged 6.39% as LME 4 month aluminum pushed 3.27% at the close of the Australian market. At the same time, Qantas Airways, Australia’s largest airline, soared 3.5% amid the company raising its international fares across its network for the first time in almost 18 months due to increasing demand in travel.

Notable Asian Session Event Risk / Economic Releases

Written by: Michael Wright, CFDTrading Research
Questions? Comments? Send them to mwright@fxcm.com

U.S. Equities Rise on Strong Confidence, Retail Sales

U.S. Session Key Developments

•    Confidence Indicator and Retail Sales Beat Estimates
•    Commodities Continue to Fall as Dollar Shows Strength
•    Financial Regulation Bill Passed by House of Representatives

U.S. stocks rallied for a third consecutive day and reached their highest levels since December 1st as retail sales and consumer confidence data beat expectations and boosted investor optimism.  During the morning trading hours the Commerce Department reported that retail sales rose 1.3 percent in November, while the University of Michigan Confidence index rose to 73.4, its highest level since September.  Both figures beat estimates and pushed equities higher despite falling commodity prices and a stronger dollar.  Crude oil closed below $70 per barrel for the first time since September, while gold and silver each fell at least 1.3 percent.  The greenback, on the other hand, continued to assert itself against its major cross currencies and the U.S. Dollar Index closed above 76.50, its highest level since early October.

DJIA 30                      10,471.50                   +65.67               +0.63%
The Dow closed higher by just over half a percent as all but two of its sectors posted gains on the session.  The basic materials sector posted the biggest gain of the index thanks to an 8 percent rise in Alcoa after JPMorgan Chase increased its earnings estimate.  The industrial goods & services sector posted the second-largest gain of the day as General Electric, Boeing, and United Tech Corp. posted well over a one percent gain each.

S&P 500                     1,106.41                   +4.06                 +0.37%
The broader S&P500 index closed higher with a smaller mover than the Dow as retailers climbed 1.3 percent after the Commerce Department retail sales data beat expectations.  Macy’s Inc. and Best Buy Co. climbed more than 2.6 percent on the positive data as investors gained confidence that this could be a better-than-expected holiday sales season.  Overall, the S&P index posted a minimal gain of 0.1 percent this week, but has climbed 64 percent since March 9.  This long rally has pushed S&P valuations to approximately 22 times its companies’ earnings.

NASDAQ                    2,190.31                    -0.55             -0.03%
The NASDAQ was the lone U.S. index that fell on the day as technology stocks fell just under a half of one percent.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Can Crude Break Pull Up From its Worst Trend in Six Years?

North American Commodity Update

Commodities – Energy

Can Crude Break Pull Up From its Worst Trend in Six Years?

Crude Oil (LS NYMEX) -  $70.11  //  -$0.43 //  -0.61%

While momentum may have flagged somewhat into the end of the week, crude’s trend is still startlingly clear. The commodity is heading for its eighth consecutive daily loss and thereby ushering in the worst trend the market has seen in six years. What’s more, this sharp selloff cannot be minimized as a short-lived correction. The sudden leverage in volatility merely amplifies a bias that has been in development since the market hit its late-October swing high. From the swing high marked eight weeks ago, oil has retraced a significant 15 percent. While sentiment is responsible for the recent intensity for selling pressure; underlying fundamentals are showing a greater prominence when it comes to consistency of trend – and normal supply-and-demand concerns may even garner a greater impact on short-term volatility should risk appetite further balance. This past week’s inventory numbers have shown that week-to-week fluctuations do not carry as much weight as the overall trend – speaking to the still hefty discrepancy between supply and expected consumption. Crude stockpiles in the week through December 4th fell 3.823 million barrels; but the overall level is still 7.2 percent above the five year average for the period. Furthermore, holdings in the Cushing, Oklahoma region (where the WTI grade that is traded on the NYMEX is stored) surged 8 percent in the same period to its highest level since early August.

According to headlines today, the outlook for a rebalancing of this fuel overhang is far off. According to the International Energy Agency, OPEC has achieved 58 percent of its production cuts laid out for November versus 60 percent the previous month. Output from the 11 nations with quotas grew by 90,000 barrels per day to 26.61 million barrels. Looking ahead to the production meeting on December 22nd, officials from the individual economies have consistently voiced their predictions that production levels will not be changed. On the other hand, there are encouraging signs that demand may be slowly recovering from the depressed levels established by the recession. Today, China reported industrial production grew 10.3 percent in the year through November and retail sales expanded 15.8 percent in the same period. The largest consumer, the US, reported a monthly increase in retail sales 1.3 percent and a near two-year high in consumer confidence. However, these factors are likely to play out over time. Next week’s price action will likely once again fall to speculative interests. At least a temporary bounce in crude is a high probability in the opening days of the week. Whether a bounce turns to a meaningful reversal though depends on the underlying direction in risk appetite. Should the Dow break from congestion, it would likely drag the commodity with it. It is interesting to note though that weekly futures volume though the past week hit a record high of 2.011 million contracts through the decline.

Commodities – Metals

Gold Plunges a Monthly Low Following an Impromptu Dollar Rally

Spot Gold  -  $1,116.30  //  -$14.70 //  -1.30%

Gold was forced out of congestion and into another aggressive, short-term decline Friday by an unexpected surge in the US dollar. The dollar index (trade-weighted) pushed to its highest level since November 3rd in an extension of the bullish reversal that began early last week. The correlation between the greenback’s strength and gold’s weakness offers a clear view of which role (dollar-hedge, inflation-head, high-return asset) is most important at the moment. Underlying sentiment was positive, but comparatively reserved. Equities advanced for the third consecutive session. Inflation expectations also received a boost on the day. The US Import Price Index rose expanded on an annual basis for the first time in 13-months and the inflation-adjusted TIPs index measured by iShares stalled in its biggest, bearish correction since April. All told, the speculative interest in the metal versus the US dollar shows the primary drive for the session. Whether risk appetite holds its prominence into next week (and whether other factors aid or hinder sentiment) remains to be seen. It is interesting to note, however, that this past week, the Bank of Korea labeled gold’s strength an “illusion” and said it was not looking to take on more inventory. Though a relatively small player among the central banking group, it is a strong and unambiguous signal from one of the very few groups that can maintain a gold advance at record highs.

Spot Silver  -  $17.04  //  -$0.37 //  -2.13%

Silver marked another sharp decline through Friday’s session. This ratcheted up the tally to six bearish sessions in the past seven active trading days – the worst trend since the correction through June and into mid-July. From peak to trough, the precious metal has plunged over 13 percent from the 16-month high set before the most recent plunge. The fundamental drive for the day would come from the strength of the US dollar that would invariably drive most of the more speculative commodities lower. In fact, the greenback’s influence on silver (like with gold) is significant enough to overwhelm the mild rise in risk appetite that has developed in the second half of the week. If sentiment slips next week, the market’s bias already presents a scenario for a much more aggressive retracement.

Discuss gold and oil trading with other traders in the DailyFX Forum

Written by John Kicklighter, Strategist
Questions or Comments about this article? Send them to jkicklighter@dailyfx.com

Asian Stocks Halt Four Day Decline as Industrial Outputs In China Top Forecasts

Asia Session Key Developments

• Japan’s Consumer Confidence Slips in November
• China’s Trade Surplus Unexpectedly Narrows

The Asian equities market ended the week on a light note after posting its largest gain in six days as industrial outputs in China grew at an annual pace of 19.2% in November to top forecasts for an 18.2% rise in production. Moreover, consumer prices in the region grew 0.6% during the same period after contracting 0.5% in October, while the trade surplus unexpectedly weakened to $19.09B from $23.99B as exports slumped 1.2%. At the same time,, consumer confidence in Japan weakened for the first time in 5 months, with the index slipping to 39.9 from 40.8 in October, while Bank of Japan Governor Masaaki Shirakawa said there is a need for an economic safety net in order to achieve financial stability.

Nikkei 225                          10,107.87

The Japanese equity markets ended the three-day losing streak, leading the Nikkei 225 to climb 245.05 points (2.48%) and close at 10,107.87. Nine out of the ten components traded higher on the day, with industrials rising 3.60% to lead the advance, while utilities tipped 0.04% lower. Shares of Kawasaki Heavy Industry advanced 6.33% after the Nikkei newspaper said Vietnam’s government will implement Japan’s bullet-train technology for its rails connecting Hanoi and Ho Chi Minh City, while Taiyo Yuden surged 8.54% as Tokyo Securities boosted the company’s stock rating from “below average” to “neutral.” At the same time, JTekt leapt 6.70% amid Credit Suisse Group upgrading the firm’s rating from “underperform” to “outperform,” while Nomura Holdings advanced 3.36% as Mitsubishi UFJ Securities raised its rating on the stock to “strong outperform.”

Hang Seng                        21,902.11

Hong Kong shares closed to the upside on Friday to end the longest slump since January, leading the benchmark equity index to surge 202.07 points (0.93%) and end the trade at 21,902.11 as 8 of the 9 components traded higher on the day. Shares of China Mobile slipped 1.05% as China’s government ordered the country’s mobile-phone operators to cut domestic and overseas long-distance charges starting on January 1^st, while Citic Pacific surged 2.87% as China Green Agriculture began trading on the NYSE December 7^th 2009, marking the beginning of its share trading on the U.S. capital market.  Moreover, Esprit Holdings rose 2.67% as the company cut its store openings target for this fiscal year in order to focus on quality and size improvements on new outlets, while Hang Lung Properties gained 1.32% on speculation that luxury home prices may rise 10% in the next 12 months as borrowing costs remain low.

S&P/ASX 200 Index           4,635.20

Stocks in Australia traded to higher on Friday as gold prices halted the four-day slid, leading the S&P/ASX 200 to rise 28.50 points (0.62%) and close at 4,635.20.  Eight of the ten components traded higher on the day, with basic materials rising 1.30% to lead the advance, while consumer goods slumped 0.46% to taper the advance. Shares of Mincor surged 7.65% as the company announced it will add two additional underground drill rigs and a surface rig to its existing six underground drill rigs, while Rio Tinto, the second-largest iron ore exporter pushed 0.54% higher as the company appointed a new chief negotiator with Asian steelmakers. At the same time, BHP Billiton added another 1.35% following yesterday’s 1.45% advance as Morgan Stanley expects China to remain a net importer of coal in 2010, while Karoon Gas Australia soared 6.77% as BofA Merrill Lynch analyst Mark Hume said he sees little evidence to doubt the presence of gas at Poseidon-2.

Notable Asian Session Event Risk / Economic Releases

Crude Oil Suffers its Worst Bear Trend in Three Years

North American Commodity Update

Commodities – Energy

Crude Oil Suffers its Worst Bear Trend in Three Years

Crude Oil (LS NYMEX) -  $70.49  //  -$0.18 //  -0.25%

Oil’s aggressive plunge eased through Thursday’s session; but the reserved pace wouldn’t be able to avoid the unfavorable trend and records set through the past week’s slump. A seventh consecutive decline for the commodity marked the most extensive bear trend since September of 2006. Furthermore, the net loss on this series is an impressive 7.8 percent and the pull back from October’s swing high at $82 totals well over 11 percent. Over the past few months, the balance between fundamental and speculative influences has grown closer in line. However, in this sharp decline, we finally see risk appetite removing its support of market that is otherwise plagued by a massive overhang of supply. This past week’s inventory figures maintain the discrepancy between current price and supply-and-demand fundamentals. The US Department of Energy’s crude inventory figures reported a 3.823 million barrel decline; but stores in the Cushing, Oklahoma region (storage for the NYMEX’s West Texas Intermediate grade) surged 8 percent for the sharpest increase since January 2nd to the highest level for stockpiles since early August. Furthermore, gasoline inventories grew 2.253 million barrels to levels not seen since April. On the other side of the market, total fuel demand averaging 18.5 million barrels per day through the four weeks ending December 4th is off 3 percent from the same period a year ago. Without a significant increase in energy consumption, global producers’ reluctance to hurt revenues and reduce output will make for a slow rebalancing.

Heading into the end of the week, this maturation of oil’s bear trend comes into question. The correction from October’s highs is considerable; but there is still an argument to be made that the commodity’s value is still well above what fundamentals would suggest. However, as before, the prevailing market price for crude rests more with risk appetite than the natural demand for the natural resource. On this front, we may actually see the market put in for its first advance in eight trading days. The past 48 hours has seen the US dollar and investor sentiment in general stall without a clear driver or coordinated sell off in the wide range of risk-sensitive markets. However, taking measure of speculative interest in the market; volume of the active crude contract on the NYMEX is at its highest level since February 6th and the four-week average is at levels not seen since June 2008. This points to a building interest in taking the market down even if sentiment is holding up.

Commodities – Metals

Gold’s Reversal Stalls as Investor Sentiment Stabilizes

Spot Gold  -  $1,129.90  //  $1.30 //  0.12%

Gold closed its first bullish session in five days – though conviction behind the upswing was tepid at best. An objective assessment of price action through past week reveals a moderation of the sharp reversal from record highs of $1,226 set no more than a week ago. For fundamental guidance today, speculative interests were relatively stable with the US dollar edging back modestly through the session and the Dow drifting in a constricted three-week range. For the metal’s fundamental role as an inflation hedge , the iShares TIPs fund dropped to a three week low and the yield curve (difference between the 30 and 2 year maturities) widened to a spread not seen in 15 years. There is little opportunity outside a market-wide rebound in risk appetite or renewed interest from central banks that this commodity will return to record highs in the near future.

Spot Silver  -  $17.37  //  -$0.01 //  -0.06%

The curbed strength of the US dollar and the tempered deterioration in underlying risk appetite has led silver to congestion and its first official bullish close in six sessions. The precious metal is now trading just above the notable $17 per ounce pivot after having plunged through the $19 and $18 figures. There is a possibility that this pull back will encourage speculators to jump in at a “cheap” level however. ETF Securities reportedly added $45.1 million worth of inventory to its metals fund this past week despite the plunge. On the other hand, aggregate open interest on futures is plunging its lowest level since September 28th.

Discuss gold and oil trading with other traders in the DailyFX Forum

Written by John Kicklighter, Strategist
Questions or Comments about this article? Send them to jkicklighter@dailyfx.com

Stocks in Asia/Pacific Slump on Earnings Outlook, China Plans to Re-Impose Home Taxes

Asia Session Key Developments

• Nikkei 225 Falls the Most in a Month
• Australia’s Adds 6 times More Jobs Than Previously Estimated
• Japan Machine Orders Slump in October

The Asian equities markets extended yesterday’s decline, with the Nikkei 225 falling 1.42% to mark the largest fall this month, while the Hang Seng weakened for the fifth day as policy makers in China take additional steps to temper the rise in asset prices. China’s State Council announced it will re- impose sales tax on homes sold within a five-year of purchase, and said it will curb some tax breaks for auto purchases. At the same time, carmakers in Japan traded lower amid speculation that a weaker dollar will hurt earnings overseas, with shipping lines retreating on lower rates to transport commodities. Moreover, Japanese machine orders for October slid 4.5% from a month ago to mark the second decline in the past 5 months, while domestic corporate goods price index climbed for a fourth consecutive month. Meanwhile, Australian unemployment scaled back to an annualized rate 5.7% in November from 5.9% the month prior, with companies adding six times more jobs than previously estimated during the month.

Nikkei 225                          9,862.82

The Japanese equity markets traded lower for a third successive day, leading the Nikkei 225 to plunge 141.90 points (1.42%) and close at 9,862.82. All ten components traded lower, with oil & gas leading the decline, falling 3.36%, and was followed by a 1.85% drop in consumer goods. Shares of Tokyo Electron plunged 6.49% as chipmaking equipment in Japan slumped 53.6%, while Hitachi Construction pushed 1.77% lower as the company plans to sell 20 billion yen in three-year bonds at par. At the same time, Kirin Holdings fell 1.74% as total beer shipments extended Octobers decline of 4.3% to tip 2.4% lower in November, while Panasonic Corporation scaled back 1.92% as the company acquired  50.19% of Sanyo Electric, which advanced 10.69% following the announcement.

Hang Seng                        21,700.04

Hong Kong shares closed to the downside on Thursday for a fifth straight day to mark a fresh one-week low, leading the benchmark equity index to shed 41.71 points (0.19%) and end the trade at 21,700.04 as 7 of the 9 components traded lower on the day. Shares of Sun Hung Kai Properties slipped 1.37% as China’s State Council plans to re-impose sales tax on homes sold within a five-year period following the purchase, while China Construction Bank slumped 0.73% as Reuters reported the bank may sell 20 billion yuan of subordinated bonds by the end of 2010. Meanwhile, China Life added 0.38% subsequent to Chairman of the Chinese Insurance Regulatory Commision stating that the condition of China’s insurance is better than what was at the start of 2009, while Cathay Pacific Airways slumped 4.21% as the number of the number of passengers tipped lower to 82.0% in November from 82.3% in the previous month.

S&P/ASX 200 Index           4,606.70

Stocks in Australia traded lower on Thursday as copper prices slid 0.5% during the New York session, with the S&P/ASX 200 shedding 31.20 points (0.67%) to close at 4,606.70. Seven of the ten components traded lower on the day, with oil and gas declining 1.82% to lead the decline for the second straight day, while telecommunications added 0.62%. Shares of BHP Billiton pushed 1.45% lower as First Quantum minerals believes it has a cost advantage over BHP Billiton as First Quantum acquires a plant in Western Australia for less capital costs than building it themselves, while Santos slumped 4.97% to post its largest fall in seven months subsequent to announcing that output may fall next year, with spending rising 75% due developments in liquefied natural gas projects in Australia and New Guinea.  At the same time, Rio Tinto slid 1.55% as Australia’s mineral and energy exports fell 2% in September, while CSL Limited tipped 1.15% lower as the company bought back 637,746 shares on-market.

Notable Asian Session Event Risk / Economic Releases

Oil Drop Continues, Gold May Bounce Before Selling Resumes

Commodities – Energy

Crude Oil Drops to $70 as Selloff Continues

Crude Oil (WTI)       $70.82       +$0.15       +0.21%
Oil prices have taken out support in the $72.86 – $75.13 congestion region and are now set to test the psychologically significant $70 level, with a push lower targeting $68.86. On the fundamental side of things, a decline in US jobless claims figures may help to engineer a bit of a boost on hopes for firmer demand from the world’s largest crude consumer. Trade Balance figures are also up for release. On balance, the path risk appetite and US Dollar remain the most compelling catalysts for price action.

Commodities – Metals

Gold Technical Positioning Points to Bullish Correction

Gold       $1126.75       -$1.85       -0.16%
A bullish Falling Wedge formation seems to be taking shape above support at $1123.38. The setup is bolstered by positive divergence on the RSI oscillator, hinting that a correction higher may be head. Wedge resistance is seen at $1135.40. The spread between March 2010 and December 2010 90-day fed funds futures has retained a strong inverse correlation gold prices, hinting that the outlook for US interest rates next year remains of primary concern and putting the onus on the jobless claims figures up ahead.

Silver       $17.40       +$0.03       +0.14%
Silver has found support above $17.23, previously the bottom of a range that had contained prices through the first half of November. As with gold, positive RSI divergence suggests a near-term upswing will be seen before bearish momentum continues, with initial resistance seen at $17.77. Fundamentally, the landscape is much the same as that of gold, the US rates outlook and therefore the jobless claims figure being of primary importance.

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